Principles of Libertarian Economics: Part 3

by Abraham Guillen (translated by Jeff Stein)

This is the final installment in this three-part series. Part I ran in LLR #14, Part II in LLR #15.

Information and Self-government

A self-managed economy will have to rationally organize the branches of industry and, within each one, integrate the small and medium enterprises with the big enterprises to constitute a unified whole. For example, in the branch of industry of domestic electronics, which seems to have no relationship with the construction industry, it may be suitable to control home heating and cooling not with individual refrigeration and individual furnaces but centrally, with the goal of saving energy. In this sense, the construction industry, to construct new housings, would build them to work in the manner of hotels, with all included services, so the worker would live similar to a present day bourgeois in a great hotel. For this to happen it would be necessary to increase the productivity of labor in the primary and secondary sectors, so that each worker in agriculture and in industry would be capable of producing for many people so that, in compensation, they would proportion him the necessary services of a sort of social hotel, as we have indicated. But for this to happen will require a great revolution in culture and technology, investing much in Research and Development.

The self-managed economy will have to invest a good portion of the national income in the production of both consumer and capital goods, particularly in its first years of operation, so that the productivity of the labor is increased to unprecedented levels. In this order of ideas, economic growth, with libertarian socialism, would be greater than with private capitalism or State capitalism, since the surplus-value wasted on the parasitic classes under capitalism would be invested instead. Consequently, it wouldn’t be necessary to harshly tighten the belts of the workers, as did Stalin; instead the gross national or social income would increase annually in greater proportion than under industrialized capitalism or bureaucratic socialism (which wastes too much in armaments, in salaries of unproductive officials, and slows economic growth to no greater a pace than that of the developing capitalist countries).

By means of the application of information and of computer networks, well supplied with all types of data, the Federative Council of the Economy would have the actual information for each branch of production or of services. Therefore, the economic integration of branches of production and of service would be a positive science, which would know everything necessary in order to avoid crisis of disproportional of growth in those branches, without the production of excesses of personal, of goods not sold, or of raw materials, since it would be known, at each moment, the amount necessary to produce, to distribute or invest so that the social economy has a law of harmonious development.

For example, the central computers of the Federative Council of Economy, with informative contributions of the computer terminals in local factories, provincial and regional, would make known what was everyone’s production, reserves and shipments to the self-managed market. In the case of the industry for manufacturing of paper containers, the central computer would register the number of establishments, the personnel employed in each one of them, total of work-hours, cost of the personnel in stable monetary units, electric power consumed in the process of production, value of the fuels and gas used, value of the consumed raw materials, general expenses, taxes, value of the total production, value of the employed labor, amounts destined to pay debts and for new investments. In sum: programming the economy would be simple, without need of bureaucrats, of capitalist managers or of technocrats.

When we speak of taxes we don’t refer to the tribute of the western capitalist type nor to the business taxes (mainly figured as a business expense usurped from the enterprises by the State in the USSR and in the “popular republics that made up the COMECON), but to the delivery of a pre-determined quota of the economic surplus, extracted by the self-managed enterprises, transferred to the self-governments, responsible for returning those transfers to society in social and public services according to their ability: sanitation, hygiene, paving of streets, highways, roads, ports, railroads, education, public health and other responsibilities of the self-governments which would be too great to enumerate.

Labor-Value Money

In this case we would attempt to strengthen the economy of the free self-managed municipality, not in the traditionally Roman [state-citizen] nor modern bureaucratic sense, but as the social and public enterprise of the citizens; as well as the industrial, agricultural, of research enterprise or certain global services which would constitute the task of the associated workers with their means of production, self-organized into Worker Councils of Self-Management and in Basic Units of Associated Labor, where the economic accounting should be automated by means of computers and take as their unit of calculation, the labor-hour (LH). It would have thus a monetary equivalence of the same value, if the money is intended to remain stable. The LH would circulate monetarily in the form of ticket which would give the right to consume reasonably, always leaving an important portion in order to invest more capital than wornout during a year, so that libertarian socialism would enlarge the social capital, with the goal of progressing more with self-management than under the dominance of capitalists or of bureaucrats.

The LH, as labor-money, wouldn’t lead to monetary inflation like capitalist money or like the soviet ruble, which conceal by being the money of cass, the parasitical incomes of the western bourgeoisie, or of the eastern bureaucracy, inflating the growth of the gross national product (GNP), with salaries of officials or unproductive technocrats, or with dividends, interests, rents and surplus values received by the capitalists, according to the western economic model, where each day there exist a growing parasitical class at the expense of productive workers. Every project of investment would be calculated in hours of labor (LH), as well as in terms of personal and public consumption required. It would be monitored that neither would be excessive in the carrying on of a libertarian, self-managed society, of direct associative democracy, so that a part of the global economic surplus would be invested in achieving a greater automation of industrial production and of agricultural production. It would thus be possible to continue reducing the working day to a range which would allow a more leisure time, so that all the citizens could occupy their time in more relaxation and, above all, in better scientific, cultural and technological preparation.

The LH, as labor-money and as a quantification of the economy, having a stable monetary value would program the economy: to account it; to establish the costs of the goods and services; programming the integrated branches of the division of the labor and correct disharmonies between them; quantifying in the products the cost of raw, energy, amortization of the capital, value of the work, economic contributions to the local self-governments and to the national co-government, etc. All of this would function within a libertarian socialism of a self-managed market, without speculators, hoarders or merchants, in order that competition benefit the workers and the consumers, the cooperative groups and self-managed enterprises, in the manner similar to the way the market functioned in the Spanish libertarian collectives during the Spanish Revolution of 1936-39. The goal would be to avoid the bureaucracy of a centrally planned economy, such as occurred in the USSR and China, where the officials decided everything and the people participated in nothing. As if that were socialism, however much they try to introduce it thus by means of a totalitarian propaganda, as if lies could be converted into truths by force of repeating them as the only truth, thanks to the state monopoly of the radio, the press, the television, the universities, the schools, so that Power regulates knowledge according to their political convenience.

In a libertarian economy, labor-money wouldn’t be money in the capitalist sense such as we understand it and need it today, since it wouldn’t allow the individual accumulation of capital in order to exploit the labor of other people and obtain a surplus value. Rather it would be intended to facilitate the exchange of goods and service, in a self-managed market, where these exchange at their true labor value, so that it fulfill economically the law of equal exchange in equality of condition for all the integrated branches of the social division of the labor and the law of the cooperation of those same branches or federations of production and of service. If, on the other hand, there were no free operation of the self-managed market, things would fall into economic chaos, by trying to centrally plan everything. Prices and their economic calculation, as well as the market that really forms them (without maintaining bureaucratic costs) are only possible within an indicative global programming, but which leave the day-to-day market free, so that all the enterprises are able to produce the best and most economically, about which the consumers must ultimately decide. From this method, there is an invisible hand which self-regulates the social economy, better than thousands of officials and technocrats equipped with thousands of computers who without liberty, order disorganization by being poorly informed or because of the self-interests of the totalitarian bureaucracy, who manage more like inquisitors or cruel police (as happened in the USSR and China).

If the LH, the unit of labor-money, would have, for example, an purchasing power of 1 hour of average social-labor and this were equivalent, roughly speaking, to one dollar, one could establish, among others, the following calculation of economic-accounts:

Calculation in (LH) of an Industrial Enterprise

  • Costs of machinery = $1000 = 1000 LH
  • Raw materials, energy, etc. = $50,000 = 50,000 LH
  • Hours worked in production = 50,000 LH
  • Total of LH = 101,000 LH
  • Units produced during the period of work = 100

Dividing the total number of LH, spent in the process of production, and the total of units produced in that time of work which could be daily, monthly, or yearly, we would have an average of labor value for unit produced of 1.010 of LH or of labor-money.

Now then, as no money could be absolutely stable, since if the productivity of the labor increases, due to improvements in machines, education of the workers and more efficient methods, it would result that the LH will end up having less value of exchange, increasing its value of use, driving this economic process toward an economy of abundance where, overcoming venal value, the value of use would only remain. Consequently, having reached this stage in the economy and technology, with most of the work automated, the value of the produced goods wouldn’t be based much on living labor, but almost everything would be labor of the past (accumulated capital), which would determine thereby a self-regulated production of abundance. Then the wonderful time will have arrived of overcoming finally both money and the commodity, each man receiving according to his necessity, although he only contributes according to his unequal capacity, or in other words, that it would make possible the economic equality between the men: libertarian communism, rationally and scientifically, economically possible, without which it must considered as a beautiful utopia.

Only a self-managed economy, rational and objective, based on scientific laws, from the commencement of the establishment of libertarian socialism, avoiding the fall into one phase or another, into either the socialism of group property, into forms of corporatism or of narrow syndicalism, but towards a condition of always placing the general interest above the particular interest of the professional or work groups.

The Libertarian Society

On the subject of the future of a libertarian and self-managed society, Kropotkin warned and advised:

We are convinced that the mitigated individualism of the collectivist system will not exist alongside the partial communism of possession of all of the soil and of the instruments of labor. A new form of production will not maintain the old form of redistribution. A new form of production will not maintain the old form of consumption, just as it will not accommodate the old forms of political organization.

In this order of ideas, explains Kropotkin, the private ownership the capital and of the earth are attributes of capitalism. Those conditions were consistent with the bourgeoisie as a dominant class, although the public [state] ownership of capital and of the earth is consistent with the capitalism of the soviet-State, which elevates the totalitarian bureaucracy as a new dominant class.

The private ownership of the means of production and of exchange created capitalism as a mode of production and the bourgeoisie as dominant class.

“They were”, says Kropotkin, “the necessary condition for the development of the capitalist production; it will die with her, although some may try disguising it under form of a ‘labor bonus’. The common possession of the instruments of labor will bring necessarily the common enjoyment of the fruits of the common labor.” (The Conquest of Bread, p.28)

If upon changing the mode of production and of distribution, daily life doesn’t change, including distribution, consumption, education, the political system, the legal and social, in the sense that one dominant classes are not substituted by other, then, really, nothing essentially has changed. Thus it happened in the Soviet Union, where the economic categories and the economic laws of the capitalism were hardly modified, with the result that the economic dictatorship of the bourgeoisie was replaced with the political and economic dictatorship of the bureaucracy and, in consequence, private or anonymous capitalism for the capitalism of State. A revolution like this, although it is called socialist, constitutes a great swindle to the detriment of working people, for whom in the majority of cases, it has not meant more than a change of master or of a saddle, to the unfortunate beast of burden. So instead of being the proletarian of the bourgeois, they have a new Patron, that is to say, the technocrat and the bureaucrat. In our way of thinking, the alternative to capitalism is not Marxism Leninism, but libertarian socialism.

The True Social Revolution

For a revolution to be true, in the sense of emancipating working people from the oppression and exploitation of the dominant classes, it has to establish a new mode of production, exchange, distribution and consumption and create new social relationships; new and more powerful productive forces; new political forms of popular direct participation; new legal institutions having as their basis the popular jury, new universities and technical schools integrated with industries, agriculture, mining, energy, fishing, the forests and other sectors; new philosophic, political,social, artistic, and cultural doctrines; new conceptions of national and social defense based more on the people in arms (than on a bureaucratic professional army, expensive and wasteful) in order to defend the society, as much inside as outside of it. It is necessary to affirm the system of popular self-defense, since without which there couldn’t be a guarantee that self-management will be accepted by a professional army, the latter always having tendencies to stage a “coup” in order to take Power.

On the other hand, in order to avoid the coming to power of a one-Party-state, which is the worst and greatest single political wrong, as happened in the USSR, there will need to be created a participatory socialism. This would entail a respect for the free personality within the collective, the self-determination of the local governments within a federalism which coherently maintains a unified market, the social and national self-defense, diplomatic relations with the exterior, the socio-economic system as a relatively homogeneous regime. A federalism which keeps a national and social accounting system in order to estimate and program the authentic valuation of the national or social global income, making it possible to know where we have been and toward where we are going economically, socially, politically, scientifically and technologically.

But a new economic system, based on self-managed socialism, will have to have another way of estimating the annual economic growth on the basis of short, medium and long term plans, constructing a macro-economic picture of the national and social economy, departing from the known figures and projecting toward figures to be attained in the next trimesters, semesters, years. Thus the future, in certain manner, will be anticipated by having a Federative Council of the Economy, where each federation of production or of services knows that which it has and that which it wants, in accordance with the effective demand of the self-managed market. Libertarian socialism, if it wants to distinguish itself from authoritarian soviet communism, must respect the law of the supply and demand, without falling into bourgeois liberalism, since in the self-managed market the federations of production and of social and public services act competitively. Because if the market is suppressed, and with it the law of labor-value, the law of economic competition, the law of formation of just prices in the market, it would not be possible establish a rational economy of costs and prices, necessary investments and appropriate consumption. In its place would be a centralized and bureaucratic planning which places the total-State above the oppressed, exploited Society, as happened in the USSR under a planning of economic decrees, without respect for objective economic laws.

On the other hand, libertarian socialism has to respect the pluralism of ideas, although it wouldn’t provide a space for byzantine struggles. People would be self-organized in their own interest in self-managed enterprises, mutual cooperatives, local self-governments and all types of socio-economic and political forms of direct participation. Politics would be deprofessionalized, abolishing the political class and the political parties as expression of antagonistic interests, since each citizen or worker will participate in their enterprise, local self-government, federation, daily, without falling into the trap of electoralism, where they only participate for a day to elect a government worse than another.

Traps of Bourgeois Economics

Libertarian socialism will have to create a new economic doctrine and a new system of estimating the national or social income. Actually, the concept of gross national product (GNP), of which there is so much talk and is so little understood, counts in unstable monetary units, the total of the goods and services obtained by economic activity: agriculture, industry, services, as large integrated sectors of the national economy.

If the GNP, the way it is constituted in the bourgeois economy, were estimated in monetary units of constant purchasing power, thus deflating the official figures, it is possible that it actually diminishes instead of increasing. On the other hand, the GNP, in its bourgeois form, includes the economic participation of the unproductive “tertiary” and “quaternary” sectors, in the sense not that this should be concealed, but that the GNP shows “growth” when it may have diminished materially, in effective production. Thus, for example, in many countries which are diminishing their industrial and agricultural production during some years, but if salaries increase and the number of tertiaries in the state bureaucracy, commerce, the banks, and in social and public services grow, it is said that the GNP has grown, for example, an annual 3%, when the reality is that this macro-economic figure only represents salaries, incomes without effective work, surplus values taken, parasitic income , etc.

Libertarian socialism, creating a social economy based on truthful figures, would have to estimate the GNP in a different manner than the capitalists. It is necessary to give to the concept of social income, units which are measured or concrete and in constant money based on material output: agriculture, cattle raising, forests, fishing, energy, mining, industry, or whatever is actual production. As for the “services”, only transportation, railroads, trucking, marine and air would be included in the concrete estimate of the effective or material income, since although transportation doesn’t add production, it transports it from one side to another and, in consequence, it should be included in the concrete income of one year to another.

Adding the concrete income alongside gross income (administrative “services”, commerce, banks and other social and public services), it would be seen if these take too great a percentage in the total income by having too many unproductive personal who, in order to not drain the social economy, would have to be recycled as productive personnel. Now then, in the “services” which could be considered as productive, would be included the personnel destined for Research and Development (R &D), without whose presence an economy will stagnate for lack of economic and technological progress; but the personnel of R&D should be, besides in the Institutes or Centers (which tend to be bureaucratic and technocratic), directly in the industrial enterprises, agricultural, energy, forests, mining, fishing, etc., since science and technique should be united directly to labor as immediate factors of production and not as though the ostentation of an academic title should make one a technocrat.

In sum, the net income of a country would have to be estimated, in a libertarian socialism, at costs determined in relatively stable physical and monetary units which don’t mislead, deducting the necessary investments of social capital in order to enlarge production and not simple reproduction as happens to the bourgeois economy in a crisis.

The estimate of the national and social income must be transparent: from the total of the wealth created in a year must be deducted the material consumption of people and that of self-administration (where there should not be much bureaucracy, by reason of better information) and to deduct, set aside or remove the social or national saving destined for investment in order to increase the reproduction of effective wealth, create new enterprises, design improved and more productive machines, carry on scientific investigation, automate industrial production and public services, and mechanize and electrify agriculture.

Liberation of the Working People

In sum, the libertarian economy should liberate the worker from their old employers, either private managers or from the State as Manager, to end that the workers, by means of their Self-Management Enterprise Councils, direct the economy which they create with their labor upon the means of production associated, from the bottom up, by means of the federations of production and of social services composed in a Federative Council of the Economy; only thus could there be planning and liberty, an associative democracy of full participation of the working people, a self-managed socialist society, avoiding any form of totalitarian communism (which, as a matter of fact, is capitalism of the State).

Without economic liberty there can’t be political liberty; since with capitalism there is an economic dictatorship of a plutocratic minority over the majority of working people; and with capitalism of the State, in the soviet manner, the State exploits and oppresses Society by means of the one-Party which is a bad one for the majority and a good one for the bureaucratic, oppressive and exploitive minority. The solution is: neither totalitarian communism nor capitalism but self-management, direct democracy, federalism and socialism.

An Afterword by the Translator

by Jeff Stein

Abraham Guillen has given us some useful concepts for analyzing the economic systems of state-socialist and corporate capitalist countries. Although these economies are no longer dominated by individual capitalist owner-managers, they remain exploitive, class systems. According to Guillen, ownership of the means of production is now collective, spread across a stratum of “techno-bureaucrats.” These techno-bureaucrats are just as much concerned with accumulating capital through exploitation of workers, as the old “robber baron” capitalists. However, the surplus of the system is shared (although not on an equal basis) within the techno-bureaucratic class. Under these systems, legal ownership means less than one’s position in the state or corporate hierarchy. Only a system of worker self-management of their own workplaces, can eliminate this exploitation by the techno-bureaucracy.

This does not mean Guillen’s theory is without problems. His proposals for a “market without capitalists” and the establishment of “labor-money” are built open the assumption that the labor theory of value can provide the basis for a libertarian socialist economy. The labor theory of value provides a powerful argument for the elimination of capitalists and bureaucrats, since their incomes represent an unnecessary drag on the economy. However, in a self-managed economy inequalities having nothing to do with labor productivity would arise between self-managed enterprises, giving some a competitive advantage over others. For instance, the size of the enterprise, the availability of scarce raw materials, the presence or absence of strict environmental regulation by the local municipality, etc., would all come into play, and these are not always factors which are easily calculated in labor-hours.

Augustin Souchy, another anarcho-syndicalist who made extensive studies of various attempts at establishing workers self- management, observed that:

working hours as the only value determinant is unrealistic. Experience shows that the lack of raw material, rarity of quality, differences of consumer goods, highly qualified services, etc. are equally vague determinants. These factors will not change in a socialist economy.” (Beware! Anarchist!, Chicago, 1992. p.42)

One factor which is becoming increasingly important in determining production costs is energy. As the amount of labor decreases due to automation, the amount of energy in terms of fossil fuels, electricity required, etc., increases. This means that while the labor value of many products is going down, their energy value is going up. As long as energy is cheap and abundant, this does not necessarily present a problem. However, in the future, as the southern hemisphere becomes increasingly industrialized and there is a greater demand for energy, and as fossil fuel supplies dwindle, a purely labor-based system of economic accounting would collapse. Energy would either have to be rationed, or some sort of global federation would have to set a tax on energy. Either way, the labor-exchange economy would be forced away from an unregulated market system. On the other hand, the sort of energy accounting based system proposed by some “green” economists is not adequate either, since the energy theory of value does not take into account the qualitative difference between human energy (labor) and non-human energy.

There is no such thing as a perfectly, objective theory of economic value. Each theory has its own hidden biases which will tend to skew the results of any accounting system (this includes the bourgeois scarcity-value system, which favors those who own capital and scarce resources). The best a labor theory of value can do is identify that part of a thing’s (a good or service) value, which is the result of social production. The rest of a thing’s value is contributed by energy, nature, the social infrastructure, and a host of other variables. In a libertarian, self-managed economy, the accounting of these non-labor costs and the distribution of these benefits, therefore needs to go beyond the individual workplaces and their labor accounts. An economic role must be played by the free municipalities (communes), who must set democratic controls over energy, environmental standards, and scarce resources, in order to make sure that those exchanges which take place do not undermine social equality or the capacity of the earth to sustain itself. Therefore, contrary to Guillen, we should insist that whatever exchange or currency system exists in the future, it provide for greater community control and allow all citizens a voice as to how value should be determined.

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